Nokia buries patent hatchet with Apple to help fund WP7 switch

Apple has agreed to pay patent licensing fees to Nokia for use of its 2G, 3G, …

Nokia and Apple have settled their differences over patent licensing, which had broiled into several lawsuits in the US and Europe. Nokia announced on Tuesday that Apple agreed to license its patents for an undisclosed sum, ending the two years of bitter litigation between the two companies. The infusion of cash should help Nokia during its expected rocky transition to the Windows Phone 7 platform.

Nokia originally sued Apple in October 2009, claiming the company refused to negotiate licensing of Nokia's extensive portfolio of cellular technology patents. Apple was "attempting to get a free ride on the back of Nokia's innovation," claimed Nokia Vice President of Legal and Intellectual Property Ilkka Rahnasto.

Apple filed a countersuit two months later, claiming Nokia tried to extract unfair licensing fees that should be covered by FRAND licensing agreements for 3G technology. Furthermore, "Nokia has demonstrated its willingness to copy Apple's iPhone ideas as well as Apple's basic computing technologies, all while demanding Apple pay for access to Nokia's purported standards essential patents," Apple argued in its legal complaint.

Despite the heated arguments that came out in court motions, Nokia clearly prevailed in the negotiated settlement. Though the exact details of the deal are confidential, Nokia revealed that Apple is paying ongoing royalty payments in addition to an up-front settlement amount. We suspect the amount is somewhere between what Apple considers "fair, reasonable, and non-discriminatory" and what Nokia had been asking for before the disagreement spilled over into the courts.

The payment must be significant, though. "This agreement is expected to have a positive financial impact on Nokia's recently revised outlook for the second quarter 2011 of around break-even non-IFRS operating margin for Devices & Services," Nokia said in a statement. In other words, the company was expected to not do so hot due to declining market share and a major shakeup in its smartphone platform strategy. But with Apple paying up for what could be as much as much as 5 years of licensing in one lump sum—estimates range from $600 million to as much as $900 million—it gives Nokia some breathing room as it transitions from Symbian to Windows Phone 7.

There has been some speculation that Nokia could leverage its win to target other smartphone platforms for additional patent licensing fees, including Android. That strategy seems unlikely, however. According to Apple's legal filings, it didn't object to paying licensing fees to Nokia, just that the company was asking for fees that were unfair and unreasonable. Ultimately, both companies seem to have gotten what they wanted—Nokia gets paid for its 3G development, and Apple paid a tiny drop out of its $66 billion bucket.

Meanwhile, Apple remains involved in other major patent battles with Motorola, HTC, and Samsung. Like the Nokia dispute, those cases could take years before a settlement is reached or a court decision is handed down.

I've read that the amount of the settlement is about $600 million (the low end of the estimates mentioned in the Ars article). This will obviously help Nokia. It also lets Apple move on to other litigation.

As for Android, this settlement doesn't seem to be a threat to Google and its partners. I've read that the dispute between Nokia and Apple was not focused on the OS. It was mostly about hardware and Android phone makers have already licensed technologies from Nokia.

WP 7 is the story here. Nokia no longer needed access to Apple's patent portfolio to improve Symbian, since it was getting thrown out of the pram. That was the big obstacle all along- Apple not being willing to cross-license it's essential iPhone patents to Nokia in order to get access to Nokia's telecom/wireless patent portfolio.

Apple never contested that they would need to license Nokia's portfolio, only the lack of RAND access- requiring the cross-license when they did not require that of others and had publicly committed to license to all comers.

So in reality this was a big win for Apple and a smaller one for Nokia- Apple didn't have to cross-license the patents they care about- Nokia gave up that fight when they basically avoided the need by imploding, so not so big a win...

WP 7 is the story here. Nokia no longer needed access to Apple's patent portfolio to improve Symbian,

And exactly what patents needed Nokia?

markstewart wrote:

So in reality this was a big win for Apple and a smaller one for Nokia- Apple didn't have to cross-license the patents they care about- Nokia gave up that fight when they basically avoided the need by imploding, so not so big a win...

And you know that Nokia gave up and Apple didn't cross-licensed anything important because...

So in reality this was a big win for Apple and a smaller one for Nokia- Apple didn't have to cross-license the patents they care about- Nokia gave up that fight when they basically avoided the need by imploding, so not so big a win...

If you were following the suit from the beginning, you would see that both companies basically got what theywanted. Apple was willing to pay Nokia for their IP without any cross-licencing agreements. Nokia with their move to WP7 seems to no longer be interested in any such agreement. No one lost the suit.

Apple quoted a total of $65.8 billion in "cash + securities" during its fiscal Q2 '11 results call, though on its 10-Q for the same quarter it lists the value of cash and short term securities as $29.3 billion. Long term securities make up the rest, and presumably would be worth significantly less if Apple cashed them in early. However, I updated the figure to quote the number that Apple uses since that is the figure most commonly cited.

If you were following the suit from the beginning, you would see that both companies basically got what theywanted. Apple was willing to pay Nokia for their IP without any cross-licencing agreements. Nokia with their move to WP7 seems to no longer be interested in any such agreement. No one lost the suit.

Good points there.

What's especially funny about those two characterizing Holwerda's as the 'reasonable summary' of the situation is that the very first comment on the article is a user dispassionately disagreeing with Holwerda's fanboy spin on his writeup.

Apple quoted a total of $65.8 billion in "cash + securities" during its fiscal Q2 '11 results call, though on its 10-Q for the same quarter it lists the value of cash and short term securities as $29.3 billion. Long term securities make up the rest, and presumably would be worth significantly less if Apple cashed them in early. However, I updated the figure to quote the number that Apple uses since that is the figure most commonly cited.

Since the long term securities held by Apple are US Treasury Bonds (and small amounts of other very liquid bonds), their worth is exactly the same if cashed out early.

Apple can afford to infringe first and pay later. It is more cost effective for them rather than negotiate first and develop sometimes later. With this at least they admitted the infringement and succumbed to Nokia's terms as they should have done in the first place.

With Samsung creeping up and Nokia phones not on the horizon until the end of the year, it may be a logical step to keep revenues afloat. Those Nokia phones sure aren't selling.

That said, if Nokia doesn't hit it out of the park with its WP7 phones... it's going to be over for them.

Typically myopic US view point. Nokia smart phones sell in droves most places in the world. For instance, China sees significant symbian sales, as well as development. It's sort of ridiculous how much larger the Chinese Ovi store is relative to the version in the US.

India, as well, sees significant symbian sales.

Just in case that wasn't clear, 2 countries that account for nearly 40% of the world's population have symbian as the dominant smartphone OS (so claims official figures released by China Mobile and several different Indian telecoms). Just think about that for a second...

I predicted a settlement almost a year ago when all the Apple Haters were saying that Nokia was going to bankrupt Apple, blah, blah, blah. Are Apple Haters ever right about anything?

And as someone else pointed out, Apple was willing to pay licensing fees, but Nokia was asking to cross license their multi-touch patents and from some indications, Nokia was trying to jack up the price on the licensing fees themselves.

Apple can afford to infringe first and pay later. It is more cost effective for them rather than negotiate first and develop sometimes later. With this at least they admitted the infringement and succumbed to Nokia's terms as they should have done in the first place.

Wait: Apple would have had Nokia not been trying to box them out with non-FRAND licensing fees. So Apple pushed back, partly because Apple likes to do that and partly because they can afford to. So in the end Apple probably paid less than Nokia wanted originally. If that is the case then who won the negotiation?

With Samsung creeping up and Nokia phones not on the horizon until the end of the year, it may be a logical step to keep revenues afloat. Those Nokia phones sure aren't selling.

That said, if Nokia doesn't hit it out of the park with its WP7 phones... it's going to be over for them.

Typically myopic US view point. Nokia smart phones sell in droves most places in the world. For instance, China sees significant symbian sales, as well as development. It's sort of ridiculous how much larger the Chinese Ovi store is relative to the version in the US.

India, as well, sees significant symbian sales.

Just in case that wasn't clear, 2 countries that account for nearly 40% of the world's population have symbian as the dominant smartphone OS (so claims official figures released by China Mobile and several different Indian telecoms). Just think about that for a second...

And what is Nokia's stated plans with Symbian? So what will happen to that share? And what will it be replaced by?Typical Nokia rah-rah.

Actually, I loathe Nokia for what they've done to symbian, including killing off UIQ. But facts are facts, and as of right now, Nokia's plans include continued development through at least 2015, so I'm not sure what exactly you're getting at.

So for the foreseeable future at least, that share likely won't budge much in Asia, but given the lackluster reception Android gets there, the absurd pricing on the Apple products, and the total lack of presence by RIM, I would say it's quite likely that old phones will persist for quite some time.

Keep in mind this is the land of XP and IE6, dependent on software that hasn't been updated since those were new, and so flat can't move on for the average person. It's sad, but there it is.

WP 7 is the story here. Nokia no longer needed access to Apple's patent portfolio to improve Symbian,

And exactly what patents needed Nokia?

markstewart wrote:

So in reality this was a big win for Apple and a smaller one for Nokia- Apple didn't have to cross-license the patents they care about- Nokia gave up that fight when they basically avoided the need by imploding, so not so big a win...

And you know that Nokia gave up and Apple didn't cross-licensed anything important because...

Public statements at the time stated that Apple was unwilling to cross-license back to Nokia and that it was willing to license Nokia's patents on FRAND terms,just that it was unwilling to be forced to give up patents in return that were not part of any public standard.

Regarding the patents originally Nokia wanted, NY Times article today:

"“Apple and Nokia have agreed to drop all of our current lawsuits and enter into a license covering some of each other’s patents, but not the majority of the innovation that makes the iPhone unique,” Apple said."

Regarding the patents originally Nokia wanted, NY Times article today:

"“Apple and Nokia have agreed to drop all of our current lawsuits and enter into a license covering some of each other’s patents, but not the majority of the innovation that makes the iPhone unique,” Apple said."

Ah, the source is a PR from Apple, good.

And what patents originally Nokia wanted from Apple? Because on their filling there was anything about any Apple patent.

Apple quoted a total of $65.8 billion in "cash + securities" during its fiscal Q2 '11 results call, though on its 10-Q for the same quarter it lists the value of cash and short term securities as $29.3 billion. Long term securities make up the rest, and presumably would be worth significantly less if Apple cashed them in early. However, I updated the figure to quote the number that Apple uses since that is the figure most commonly cited.

Since the long term securities held by Apple are US Treasury Bonds (and small amounts of other very liquid bonds), their worth is exactly the same if cashed out early.

Read page 7 of the 10-Q, over 50% of long term marketable securities are commercial securities. Treasury securities make up less than 20%.

That said, it's more complicated than that. You generally don't record securities at the value you'll get when they mature but the lesser of fair market value or cost (but then I haven't really kept up with all the changes in the US the past few years with security valuations, mostly since I'm a Canadian ). The stuff about being temporarily impaired underneath it seems to suggest the securities are worth less than actually recorded in the books, but since it's a temporary downturn they're not taking a loss on them. If it was a permanent devaluing they'd have to actually record an adjustment to valuation and take a loss on the income statement.

What have these new method patents have brought us other than litigation? There was a time when a company could build on innovations made within an industry, without consulting a legal department. I know it may seem strange now, but before State St. Patents were rarely infringed accidentally. Today patents lay claim to concepts, not designs. I think of Sikorski. He built the first torque adverse helicopter, when he invented the tail boom. Fortunately for the aviation industry, he couldn't patent the concept of a tail boom at that time. Today however... well, I'm preaching to the choir here.

Only those from the Church of Apple can believe this is a win for Apple.

Really, really deluded consumers...

Rubbish! It's a win for both of them (and of course the lawyers)... Nokia is vindicated in its fight to assert rights to key patent royalties relating to 3G GSM technology and Apple wins because it was able to negotiate (settle) on reasonable licensing terms for that technology.

Don't forget that Apple never refused to license the technology, they argued that the terms they were offered were unfair.

Actually, I loathe Nokia for what they've done to symbian, including killing off UIQ. But facts are facts, and as of right now, Nokia's plans include continued development through at least 2015, so I'm not sure what exactly you're getting at.

So for the foreseeable future at least, that share likely won't budge much in Asia, but given the lackluster reception Android gets there, the absurd pricing on the Apple products, and the total lack of presence by RIM, I would say it's quite likely that old phones will persist for quite some time.

Keep in mind this is the land of XP and IE6, dependent on software that hasn't been updated since those were new, and so flat can't move on for the average person. It's sad, but there it is.

Fair enough position, and I rescind my last sentence.

However you position is not what I've read:

Quote:

NOKIA will continue to develop its legacy Symbian mobile operating system and would support it in Australia at least until 2014.

Basically, supporting just means fixing, not rolling out new features (and only through 2014 as a minimum). Like Windows XP has been supported until recently. But that doesn't mean they didn't replace it. And that it gets new features (like IE9). Contracts change, and people will upgrade. The odds of Nokia's Symbian share increasing are practically nil, and as phones are broken and replaced they will be replaced by other things most likely (especially in the smartphone sphere where improvements are everywhere but in Symbian these days). So I still contend that inertia is not the gauge-Nokia clearly needs some cash, and they got it with this settlement. But it wasn't what they wanted, and they have advised sales will be down. That is not hyperbole, but Nokia statement. So until they turn it around in a market that they were slow to recognize and monetize, I don't think the position that Nokia isn't a leader any more is all that indefensible.

Don't forget that Apple never refused to license the technology, they argued that the terms they were offered were unfair.

No special knowledge on this speculation, but I'd bet that Apple got a good deal on the terms in exchange for settling now instead of after a few years of litigation. Nokia needs capital right now. Their mobile business is projected to post a loss in the coming quarter, so putting this behind them and getting some more cash flow now is not insignificant to their bottom line.

That and the acquisition of a modern mobile OS through their Microsoft deal took a great deal of the pressure to modernize their Symbian offerings (with Apple's IP) away.